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Annapurna Dhaba Case

Three people formed a partnership to open a dhaba restaurant. They contributed capital and took a loan. Business was good initially but one partner eloped with another partner's spouse. The remaining partner dissolved the partnership and called an accountant to prepare a balance sheet showing the assets, liabilities and each partner's share.

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26 views3 pages

Annapurna Dhaba Case

Three people formed a partnership to open a dhaba restaurant. They contributed capital and took a loan. Business was good initially but one partner eloped with another partner's spouse. The remaining partner dissolved the partnership and called an accountant to prepare a balance sheet showing the assets, liabilities and each partner's share.

Uploaded by

vini2710
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Annapurna Dhaba

On 12th august 2019, three people who had previously been employed in the restaurant industry,
formed a partnership. The eldest of three was Mrs. Sushma who had experience of working as a chef
assistant. The other two were Mr. and Mrs. Bhatia. The partnership lasted for more than 4 months
and in this connection the dissolution the preparation of a balance sheet became necessary.

Each of the partner contributed 20,000 Rs. In cash, a total of 60,000 Rs. They purchased an already
existing dhaba for 1,60,000. The price included land of Rs. 25,000, improvement to land 20,000 Rs.
And a building at 1,05,000 and café equipment at 10,000 Rs. They made a down payment of 45000
Rs and signed a mortgage for the balance amount.

All three of them shared the responsibilities and started work diligently. Mrs. Sushma who was a
middle-aged widow, she had high hopes from the business, as she was already in debt.

Cold drink supplier asked for a deposit of 3000 Rs. As he had trust issues with the new business
owners.

The Dhaba was located on the major highway and great deal of business was coming from truck
drivers. Bhuvan became a frequent customer and he obtained the friendship of Mrs. Bhatia.

In the month of October, they required some new instruments for kitchen, and they had to pay in
cash Rs. 5500 for purchasing this.
In the month of November, the cash position became too low and Mrs. Sushma had to contribute
and additional amount of 4400 to the business.

On the night of December 12, 2019 Bhuvan visited the dhaba and left afterwards. Soon after that
there was no sign of Mrs. Bhatia also, Mr. Bhatia started searching panicking for her. He soon
discovered that both have gone together and went away to search for them.

On December 16, 2019 Mrs. Sushma decided that the partnership was dissolved as there was no sign
of Mrs. & Mr. Bhatia. She called in an accountant for this purpose as to avoid any legal disputes in
future.

Mrs. Sushma told the accountant that they had been able to pay 7000 on the mortgage while the
partnership was operating. Cash on hand was 650 Rs and the bank balance was 900 Rs. There were
accounts payable of Rs10 920 and there was around 1000 Rs. Worth of food items in the kitchen.

Mrs. Sushma estimated that a reasonable allowance for depreciation was as follows

Land Improvements – 1400 Rs.

Building - 2500 Rs

Café Equipment – 1350 Rs.

Balance sheet as on Dec. 2019

Liabililties & Equity Rs. Assets Rs.


Partner’s Capital (Balancing 53,400 Land 25,000
Figure)

Bank Loan 1,08,000 Land Improvement less Dep. 18600


Loan from Mrs. Sushma 4,400 Café Equipment 10,000+5500= 14,150
15,500 – Dep (1350)
Building (1,05,000 - 2500) 1,02,500
Cash 650
Bank Balance 900
Inventory 1000
Security Deposit 3000
Total 1,65,800 Total 1,65,800

Each Partner’s Share 53,400/3 = 17,800


20,000 – 17,800 = 2200

1. Draw up a Balance Sheet for Annapurna Dhaba as of August 2019.

2. Draw up a Balance Sheet as of 16th Dec. 2019.

3. What is the share of each partner in Dec. Balance Sheet (Loss or Profit)

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